"To get rich is glorious." -- Deng Xiaoping. This is perhaps the smartest thing ever uttered by a member of the Communist Party.

Tuesday, July 14, 2009

Power politics

Last night while riding the metro I noticed an advertisement for wind energy. Showing a female factory worker at what appeared to be a wind turbine plant somewhere in Pennsylvania, the ad encouraged support for wind power. Now, it's a free country, and people should be able to purchase whatever kind of power they want. But that's not what the ad was about, which seemed to instead advocate for some kind of mandates for renewable energy. As the folks over at PowerofWind.com -- which is really the American Wind Energy Association lobbying group -- say:

To create a long-term commitment to renewable energy, the U.S. needs to adopt a strongnational RES policy. During the campaign, President Obama called for a strong policy – one that requires 25% of our electricity to come from renewable resources by the year 2025. A strong RES policy would foster a sound investment climate for renewable energy manufacturers to invest billions of dollars in new factories and employ hundreds of thousands of Americans in high-quality jobs.

Of course if wind energy was really so great people would already be using it and the lobbyists wouldn't have to require government mandates to force their usage. My guess is that wind power is more expensive than more conventional sources, otherwise people would be rushing to use it given that cheaper is better. So really what's going on here is that this lobbying group wants to force people to use more expensive energy in order to promote their particular industry. (more on this here)

The problems with government mandates about energy policy run even deeper, however, as this New York Times article points out, with politicians fighting over the spoils:

While most lawmakers accept that more renewable energy is needed on the nation’s grid, the debate over the giant climate-change and energy bill now before Congress is exposing a fundamental rift. For many players, the energy not only has to be clean and free of carbon-dioxide emissions, it also has to be generated nearby.

The division has set off a fight between Eastern and Midwestern politicians and grid officials over parts of the bill dealing with transmission lines and solar and wind energy. Many officials, including President Obama, say that the grid is antiquated and that thousands of miles of new power lines are needed to allow construction of wind farms and solar fields in the most promising spots. Many of the best wind sites are in the Midwest, far from the electric load in populous East Coast cities.

An influential coalition of East Coast governors and power companies fears that building wind and solar sites in the Midwest would cause their region to miss out on jobs and other economic benefits. The coalition is therefore trying to block a mandate for transcontinental lines.

They want the wind farms built in rural New England and offshore from Massachusetts to Delaware, and for now it appears that they may get a chance to do that. They are campaigning to keep a provision out of the legislation that would mandate a huge super-high-voltage grid, with the cost spread among millions of electric customers.

...Dan W. Reicher, an assistant energy secretary in the Clinton administration who now leads energy initiatives at Google, said the debate exposed a conundrum. “The areas with the most attractive renewable energy resources often don’t overlap with the places where the push for job creation is strongest,” Mr. Reicher said.

For example, a wind machine in North Dakota would produce more energy than the same machine in some Eastern states — but energy projects tend to get built in places where they are most wanted.

In other words, not only only would government be mandating the use of energy that probably doesn't make any economic sense, but the energy production may take place in areas that are suboptimal from an economic standpoint as well. Everytime such decision are made we impoverish ourselves, as our dollars purchase less than they otherwise would.

Really, this is a superb demonstration of the dangers of relying on government instead of the free market. Decisions are not made that are based not on what is best from a rational economic standpoint, but from a political one. Furthermore, the use of politics to make decisions introduces divisions that otherwise would not occur in society and turns people against one another (in this case people from different states). It is a force for divisiveness, not unity.

Here's an alternative idea: Renewable energy sources are preferable to conventional sources to the extent that they are cheaper and less polluting. If coal and wind energy have the same costs but wind is less polluting then it is a superior option. Therefore we should simply place a tax on power that accounts for the pollution that it generates. Figure out the costs of the pollution and impose a tax in that amount, therefore allowing the various energy sources to compete on an even playing field. Such an approach would allow markets and individuals, rather than politicians and lobbyists, to determine what energy sources are used.

Which is the most likely reason this policy has a minimal chance of being implemented.

3 comments:

Anonymous
said...

Politicians would be the arbitrators of the "tax on pollution". In such a situation, the resulting tax would likely be a measure of political considerations rather than pollution effects. Expect the same outcome if cap & trade is adopted.

Colin, did you see this story about media darling T. Boone Pickens suspending his wind farm project in Texas? After being the face of "clean energy" during the campaign, you'd think a media interested in actually informing the public will keep up the same level of attention as during the campaign. The reason for the suspension - lack of transmission lines and the fact that wind power doesn't make financial sense in the face of other fuels for energy production.